Statkraft – fourth quarter and preliminary financial statements for the 2008 financial year - Best ever year-end result

Statkraft – fourth quarter and preliminary financial statements for the 2008 financial year - Best ever year-end result

(Oslo, 26 February 2009) Statkraft made a net profit of NOK 33,262 million in 2008 (NOK 6,632 million) , while its underlying net profit came to NOK 8,097 million (NOK 7,030 million). The Group made a net profit in the fourth quarter 2008 of NOK 28,663 million (NOK 2,529 million). The underlying net profit for the quarter came to NOK 2,918 million (NOK 2,986 million).

“Statkraft achieved record profits in 2008. While profits were boosted by the swap agreement with E.ON AG, the Group’s underlying performance was better than ever, thanks to higher electricity prices, increased output and solid results from its hedging activities. Our employees worked very hard in an extremely hectic year,” says President and CEO Bård Mikkelsen.

“The Group strengthened its position as a flexible producer of environment-friendly electricity in the Nordic and Continental markets through its swap agreement with E.ON AG. As a result, we are now Europe’s largest renewable energy company,” he adds.

As a result of the swap agreement with E.ON AG, the Group increased its total assets and took a gain of NOK 25.6 billion to income. The agreement involved an asset swap and had a limited impact on liquidity.

The Group generated gross operating revenues of NOK 8,339 million in the fourth quarter 2008 (NOK 6,644 million). Gross operating revenues for the year as a whole totalled NOK 25,061 million (NOK 17,619 million), an increase of 42%. The improvement can be ascribed to higher electricity prices and higher output levels than in 2007.

Electricity prices in the Nordic market were higher in 2008 than the year before. The average system price rose from 27.9 EUR/MWh to 44.7 EUR/MWh, an increase of 60%, and the Group generated a total of 53.4 TWh (44.9 TWh), an increase of 19%.

The Group made an underlying operating profit in the fourth quarter 2008 of NOK 4,072 million (NOK 3,143 million). For the year as a whole the underlying operating profit totalled NOK 12,029 million (NOK 7,981 million), an improvement of 30% and 51% respectively.

Important events during the quarter and future outlook

On 31 December 2008 Statkraft carried out a swap agreement with E.ON AG, under which E.ON AG took over Statkraft’s 44.6% shareholding in E.ON Sverige AB and a hydropower plant in Sweden in exchange for assets and 4.17% of the shares in E.ON AG. The entire transaction was worth around NOK 44 billion, and gave Statkraft a recognised gain of NOK 25,591 million in the fourth quarter. The transaction had a limited impact on liquidity. The agreement makes Statkraft Europe’s largest producer of renewable energy.

In October Statkraft and Boliden Odda entered into two long-term commercial electricity supply contracts for the period 2009-2030. Covering the supply of around 20 TWh of electrical power, it is the largest industrial electricity supply contract Statkraft has signed since 1998, and reinforces the company’s role as the largest and most important supplier of electricity to Norway’s power-intensive industry. As part of the agreement Statkraft took over Boliden Odda’s shares in AS Tyssefaldene, bringing Statkraft’s shareholding in this company to 60.17%. The agreement goes into effect as soon as all outstanding formalities, including tax issues, have been resolved.

In October the Leirfossene Power Plant in Trondheim went into operation. The new power plant replaced two old facilities, increasing annual output from 150 GWh to 193 GWh.

In November Statkraft AS and Norfund agreed a new ownership structure for SN Power. As a result Statkraft’s shareholding rose to 60%. The shareholder agreement was also renegotiated, and Statkraft received an option to raise its shareholding to 67% through the purchase of shares at market rates by 2015 at the latest. Norfund was given an option to sell all or some of its shares during the same period. At the same time a separate company was created to manage investments in Africa and Central America. Norfund has taken a direct stake in this company alongside SN Power. The agreement went into effect on 13 January 2009.

In December Statkraft and the Austrian energy company EVN signed a licence agreement to build a hydropower scheme in Albania. Through the agency of a joint venture, the plan is to construct three power plants with a combined installed capacity of 340 MW and an annual expected output of 1 TWh.

In February 2009 Statkraft’s board of directors asked the company’s owner, the Norwegian state, to increase its equity by NOK 8 billion and adjust its dividend policy to enable Statkraft to pursue its strategy of profitable growth in the area of environment-friendly and flexible power generation.

High reservoir levels at the start of the year and higher than normal precipitation levels mean that the resource situation in the Nordic region is robust. The average system price was considerably higher in 2008 than in 2007, but forward prices indicate a slightly lower price level in the time ahead. Combined with the increased production capacity resulting from the swap agreement with E.ON, this gives grounds for a relatively high level of electricity output in 2009, and increased revenues from day-to-day power sales. However, considerable uncertainty attaches to the future development of electricity prices and the hydrological resource situation. It is expected that prices and demand for power could fall in the short to medium term, as a result of the global financial crisis. The long-term consequences are more unsure.

1)Figures in parentheses are comparable figures for 2007. 2)Adjusted for unrealised changes in value and material non-recurring items in the Group and associates.

Statkraft is Europe’s largest generator of renewable energy. The Group develops and generates hydropower, wind power, gas power and district heating, and is a major player on the European energy exchanges. Statkraft also develops solar power, marine energy, osmotic power and other innovative energy solutions. In 2008 Statkraft posted gross operating revenues of NOK 25.1 billion and an underlying profit after tax of NOK 8.1 billion. The group employs close to 3,000 staff in more than 20 countries.